Budgeting

Emergency fund

Also known as: rainy-day fund.

An emergency fund is a liquid cushion equal to three to six months of fixed expenses, set aside exclusively for unexpected events.

It should be available within 24-48 hours and held in a stable instrument — a savings account, short-term deposit or money-market fund — never in stocks.

Its job isn't to earn a high return; it's to stop an emergency from forcing you to sell investments at the worst time or turn to expensive credit.

Put it into practice

Related terms

Liquidity — Liquidity is how easily an asset can be converted into available cash without losing value.
Budget — A budget is the advance allocation of your income to spending and saving categories, with later tracking of the differences.
50/30/20 rule — The 50/30/20 rule splits monthly take-home income into 50% for needs, 30% for wants, and 20% for savings and debt repayment.

Bring it to your own numbers

netclariq applies these concepts to your real accounts, debts and investments, with simplified double-entry bookkeeping and without asking for your bank credentials.

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Educational content. netclariq does not provide financial, investment, tax or legal advice.